Clearing debt on a limited income

When you live on a limited income, it can be difficult to pay off your credit cards. By paying only the minimum payments, you are accumulating more debt because of interest charges. It is best to pay off credit card debt as quickly as possible to avoid paying large interest charges, to increase your credit score and to feel the relief of being debt-free. Here are some tips to paying off your credit cards if you are a senior living on a limited income.

Take action
The first step to solving almost any problem is acknowledging the issue and making a plan to take action. Understand that your debt will not go away overnight. Realise that you need to evaluate just how much you owe in credit card debt and that you need to make a plan to pay off your credit cards. To start making your plan, review your statements to determine your total credit card debt. You should also take note of the interest rate for each credit card.

Reduce spending
You will need to reduce your spending so that you can make larger repayments. You should aim to pay more than the minimum payments on your credit cards in order to repay your debt faster. If you eat out a lot or spend a lot of money on entertainment, it will not be difficult to find ways to reduce your spending. If you already live frugally, you will need to get creative and be a smart shopper. Start using coupons for your grocery shopping, and plan meals according to the items that are on sale each week. Opt for generic brands wherever possible.

Sell unused or unnecessary belongings
A great way to pay off your credit cards on a limited income is to boost your income by selling unused or unnecessary belongings. Some households have more than one car. If this is the case and one car is used more than the other, sell the unnecessary car so that you can make a large payment toward your credit card debt. If you don’t have an unnecessary car, consider selling your car for a cheaper one and using the difference to make a credit card payment. Other items that may help you pay off your credit card debt quickly include furniture, artwork and electronics.

Negotiate with creditors
Many people with credit cards don’t know that they can negotiate with their creditors to get lower interest rates. Negotiating to get lower interest rates is an excellent way to help you pay off your credit card debt faster, because a greater percentage of your payments will go toward your principal than toward interest charges. Call your bank and explain that you feel that your interest rate is too high considering your credit score. Creditors are eager to keep their customers and are likely to lower your interest rate if you tell them that you are considering transferring your balance to a different bank.

Transfer your balances
If your creditors are unwilling to reduce your interest rates, you can apply for a credit card with lower interest or even zero per cent rates. If you have good credit, you can generally qualify for these cards and transfer your balances from your high-interest accounts. It is possible to get a balance transfer with no interest for an introductory period, but these offers are not widely available. However, low-interest balance transfers, e.g. 0.99 per cent, are relatively commonplace. If you are serious about paying off your credit card debt as quickly as possible, then a balance transfer is definitely worth looking into. There is one caveat though: try to pay off these balances before the interest rate reverts to the higher standard rate.

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Written by Debbie McTaggart

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